Term
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Definition
Speed and ease in which the asset can be converted into cash.
Two dimensions: ease of conversion versus loss of value – any asset can be converted quick enough, but if we cut the price enough it may loose its value.
Most liquid: Cash, A/R, Inventory, Fixed Assets
Illiquid asset: cannot be quickly convert to cash, without significant loss in value. |
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Term
Liquidity or Solvency Ratios:
Ability to meet short -term financial obligations |
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Definition
Current Ratio
Quick Ratio
Cash Ratio
Net Working Capital
Interval Measure |
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Term
Asset management or Turnover Ratios:
Inventory Turnover
Day’s Sales in inventory
Receivables Turnover
Days’ in Receivables Turnover
Net Working Capital Turnover
Fixed Asset Turnover
Total Asset Turnover |
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Definition
Indicates how efficiently a firm is using its assets to generate sales or revenue
Inventory Turnover
Day’s Sales in inventory
Receivables Turnover
Days’ in Receivables Turnover
Net Working Capital Turnover
Fixed Asset Turnover
Total Asset Turnover |
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Term
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Definition
Measures how effectively manages to make profit, making money
Profit Margin
Return on Assets (ROA)
Return on Equity (ROE) |
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Term
| Long-Term Solvency or financial Leverage or Debt Ratios |
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Definition
How much debt the company is using to make the company run
Total Debt Ratio
Debt Equity Ratio
Equity Multiplier
Long-Term Debt Ratio
Times Interest earned Ratio
Cash Coverage Ratio |
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Term
| Market Value Ratios/Performance |
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Definition
Measures the financial market’s evaluation of a company’s performance
Price-Earnings Ratios
PEG Ratio
Price Sales Ratio
Market to Book Ratio
Tobin’s Q Ratio
Enterprise Value– EBITDA Ratio |
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Term
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Definition
| Tells us that ROE is affected by operating efficiency, asset use efficiency and financial leverage. |
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Term
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Definition
Right hand of the balance sheet:
Liabilities
Equity
Raising money for the firm
Decrease in Inventory
Increase in Accounts Payable
Increase in Common Stock
Increase in retained Earnings
Decrease in Inventory
Increase in Notes Payable
Increase in Total Cash Liability
Increase in Total Liability
Dividends paid |
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Term
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Definition
Left hand side - Assets
Increase in Cash
Increasing Fixed Assets, PPE and Total Assets
Decrease in Accounts Payable
Decreasing Notes Payable
Decrease Long-Term Debt
Increase in Accounts Receivable
Increase in Inventory
Funds goes up in your firm it’s a Source of Cash
Funds goes down is a Use of Cash |
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Term
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Definition
Firm’s financial statement that summarizes its sources and use of cash over a specified period of time.
Net Income + Depreciation + Current Assets + Liabilities
1) Operating Activities- year over year differences
2) Financial Activities – any changes in notes payable and long-term debt and common stock
3) Investing – year over year differences of the gross amount
When calculating the statement of cash flow:
If it is a negative amount at the end of that year the cash position of the firm is less than it was the year before. |
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Term
Common Size Statement
Percentage terms for comparison
Balance Sheet percent of Assets
Income Statement Percent of Sales
Balance Sheet Divide all liabilities by total assets
Income Statement expenses divided by total sales |
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Definition
Common Size Statement
Percentage terms for comparison
Balance Sheet percent of Assets
Income Statement Percent of Sales
Balance Sheet Divide all liabilities by total assets
Income Statement expenses divided by total sales |
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